Markets recover poise ahead of run of US earnings

Article by: PAN PYLAS

Associated Press

April 18, 2013 - 5:05 AM

LONDON
- Markets, particularly those in Europe, recovered their poise Thursday, ahead of another run of U.S. corporate earnings and hopes that the European Central Bank will cut interest rates soon to give the euro region's moribund economy a lift.

A number of financial assets have been under pressure over the past few days amid growing evidence that the U.S. and Chinese economies, the world's two biggest, may not be quite as robust as some investors had originally thought.

Commodities have also suffered in the more cautious market environment, with the prices of gold and oil experiencing a rocky few days. European stocks have also underperformed amid concerns over many economies in the cash-strapped region.

"Investors have seen enough selling in the short term and are sniffing around for some bargains," said Mike McCudden, head of derivatives at Interactive Investor. "Despite this, the gloom continues with a wave of poor Q1 earnings from the U.S., so we don't expect a stampede for stocks at current levels."

In Europe, the FTSE 100 index of leading British shares was up 0.4 percent at 6,269 while Germany's DAX rose 0.6 percent to 7,549. The CAC-40 in France was 0.9 percent lower at 3,632.

The euro also recovered somewhat, trading 0.2 percent higher at $1.3057. On Wednesday it took a battering after a hint from Jens Weidmann, the head of Germany's central bank, the Bundesbank, that the ECB could lower interest rates. In an interview with the Wall Street Journal, Weidmann said the ECB may "adjust rates" if data merits it.

"The market reaction was more pronounced than usual due to the fact that while other ECB board members have gone on record as suggesting rates might need to be lower, at no time has Weidmann ever suggested he might also lean in that direction," said Michael Hewson, senior market analyst at CMC Markets.

"For that reason alone, this is an important development and could well signal a rate reduction in the next couple of months, and a possible softening of position on the part of Germany and the Bundesbank," he added.

Commodities also steadied, with the benchmark New York crude rate up 76 cents at $87.44 a barrel and an ounce of gold 0.3 percent higher at $1,387.

Wall Street was poised for a solid opening too, with Dow futures up 0.2 percent and the broader S&P 500 futures 0.3 percent higher. How U.S. stocks actually open could hinge on a run of corporate earnings due before the bell, including Morgan Stanley and PepsiCo. Google and Microsoft will take pride of place after the close when they report first-quarter numbers.

"As quarterly earnings news continues to disappoint, Wall Street is still struggling its way through the week," said Fawad Razaqzada, market strategist at GFT Markets.

Earlier, Asian stocks dropped, with investors in Hong Kong still feeling cautious due to a bird flu outbreak in eastern China and the rapid rise of Chinese government debt. The Hang Seng shed 0.3 percent to 21,512.52. Elsewhere, Japan's Nikkei 225 index tumbled 1.2 percent to close at 13,220.07, while South Korea's Kospi dropped 1.2 percent to 1,900.06.